Flat jobless claims foreshadow another poor employment report

Reuters reports that initial claims for unemployment benefits held more-or-less even at 374,000 this week, according to new Labor Department figures. This was, however, accompanied by a small upward revision in last week’s numbers, and four-week moving average is up slightly, by 1500 claims. This prompted Reuters to describe the labor market as “treading water.”

Digging further into the numbers reveals that consumer spending is fairly sluggish. It’s initially described in guardedly optimistic terms, but then Reuters notes that “a core measure that strips out food and energy costs was also flat for the first time since September, after gaining 0.2 percent in June.” In other words, it’s difficult to perceive any real consumer spending growth that isn’t tied to inflation or rising fuel costs.

Business spending, by contrast, is “weakening,” so whatever mildly good news might have emanated from the consumer area at the beginning of the third quarter, it’s not having much impact on job growth.

That’s not a good omen for the upcoming August unemployment report, and ZeroHedge found a very bad one: the automotive industry, which has been propping up those consumer spending numbers, is going into a production decline. “The U.S. motor vehicle assembly rate for August is projected to decline by 8% to a 10.1 million annualized rate after rising by 4.4% in July,” according to projections. That would leave us with “the biggest monthly percentage decline in the assembly rate in about a year and a half.”

ZeroHedge views this as a “Cash for Clunkers” style effort to front-load auto production into June and July, as “numerous car plants worked throughout the summer, avoiding traditional temporary shutdowns and furloughs, in an attempt to provide an optical boost to the Union-endorsed Administration.” It sounds like a Hail Mary pass, keeping the summer headlines from growing even more dreadful while gambling on a surge in job creation from other sectors, just in time for the election… which does not appear to have materialized.